Analysis of Relationship between Corporate Governance Quality and Firm Market Value

There is increasing evidence that high-quality level of corporate governance predicts higher value of firm. However, almost all prior work relies on cross-sectional data and simple OLS estimation. This work examines the positive relationship between corporate governance index and the proxy of firm market value Tobin's Q on the basis of panel data. The paper consists of detailed review of the literature, after that the methodology and several variants of calculations of corporate governance index were proposed. The selected calculation method is described in detail. The sample data includes financial and non-financial information about Russian firms, listed on MICEX. Observing time period is 2011-2015. The study found a statistically strong correlation between the quality of corporate governance and the market value of firms. Some additional control variables also showed significant connection with Tobin's Q. Overall, the study confirmed the positive effect of corporate governance on the market value of the company.